-- Posted 10 November, 2008

Thereis compelling new proof of a silver (and gold) price manipulation. Theevidence connects the investment bank JP Morgan Chase, the dominantforce in world commodity trading, the U.S. Commodity Futures TradingCommission (CFTC), the primary commodity regulator, and the U.S.Treasury Department, the arranger of every conceivable bailout.

Thisweek, I received a copy of a letter, dated October 8, sent from theCFTC to a California Congressman, Gary G. Miller. It discussedallegations of a silver market manipulation because of the data in themonthly Bank Participation Report. The data in that report for Augustshowed that one or two U.S. banks held a massive short position inCOMEX silver futures of 33,805 contracts, or more than 169 millionounces. This is equal to 25% of annual world mine production, and wasup more than five-fold from the prior month’s report. After thisposition was established, silver prices fell more than 50%, in spite ofa widespread shortage in retail forms of investment silver. Neverbefore had there been a such a large concentrated position in anymarket, including every manipulation case in the CFTC’s history.Concentration and manipulation go hand in hand. You can’t have onewithout the other.

The letter was sent to me by a reader who hadthe foresight to write to his Congressman. Of course, the CFTC deniedthat a silver manipulation existed, as they always have. This provesthat the Commission responds much quicker to a member of Congress thanit does to hundreds of ordinary citizens and investors. In the future,should you decide to write to the CFTC, be sure to do so through yourelected representatives.

What was remarkable (and disturbing)about the letter was that it strongly confirms an analysis I presentedin an article dated September 2, titled, "Fact Versus Speculation" http://www.investmentrarities.com/09... Inthat article, I speculated that the shocking increase in the silvershort position by one or two U.S. banks was related to the takeover ofBear Stearns by JP Morgan in March.

Here’s a quote from my article, dated September 2.

"Iam going to speculate based upon the known facts. Maybe I will beproven correct, maybe not. However, the nature of this speculation isso disturbing, that I hope I am wrong. But I need to state it becauseif I am close to the mark, the implications for the silver market areprofound.

I think the data in the COT and the Bank ParticipationReports indicate that the U.S. Government may have bailed out thebiggest COMEX silver short by arranging for a U.S. bank to take overtheir position. This coincides with JP Morgan’s takeover of BearStearns. In fact, it would not surprise me if the bailout was JP Morgantaking over Bear Stearns‘ short silver position, at the government‘srequest. While this silver bailout (if it happened) was no doubtundertaken with financial system stability in mind, it has disturbingimplications of legality and equity"

This is the relevant quote from the CFTC’s Oct 8 letter.

"Ineffect the increase [in the short position] reflected a one timeacquisition of positions that were acquired through a merger in theindustry, and not new trading by a bank. Thus, the assertion that therewas new activity undertaken by the banks that led to a fall in silverprices is not correct since the "new" activity reflected in the CFTC’sreport was in essence positions that had already existed in the marketprior to July 1^st."

The CFTC clearly confirms, ineffect, that the big silver short position was related to JP Morgan’stakeover of Bear Stearns, since no other merger provides a plausibleexplanation. However, the Commission is not speaking truthfully aboutan increase in the concentrated short position. The CFTC’s own data, inweekly Commitment of Traders Reports (COT), show a sizable increase inconcentrated short positions of some 12,000 contracts (60 millionounces) from levels before July 1^st to the August Bank Participation Report.

Moreimportantly, the real issue is not about when the one or two U.S. banksincreased their short position, but how large that short position grewin the August Bank Participation Report. The CFTC is deceiving a U.S.Congressman by attempting to reduce the argument to when the shortposition was increased, not the obscene and manipulative size of theposition. This is deception through omission and misrepresentation.What difference does it make when the manipulative position wasestablished? The issue is how can a short position of 25% of the worldproduction of any commodity, held by one or two U.S. banks, not bemanipulative?

Bear Stearns held the largest concentrated shortposition in COMEX silver (and gold) futures at the time of its forcedmerger with JP Morgan in March. That position was not discovered untilthe publishing of the August Bank Participation Report followed by theOctober 8 letter from the CFTC to Congressman Miller. Furthermore, BearStearns had no legitimate backing to the short silver position, eitherin actual metal or cash. Otherwise it could have been delivered againstor bought back, just as would have happened were it a long position.

Theprice of silver at the time of Bear Stearns implosion was $20 to $21 anounce. A free market covering of a concentrated short position of thissize would have driven silver prices to the $50 or $100 level and wouldhave exposed the long-term manipulation. Rather than let the freemarket deal with the required short covering of such an uneconomic andunbacked short position, government authorities arranged to have theshort position transferred to JP Morgan. This was undertaken by theU.S. Treasury Department, along with taxpayer guarantees against lossto Morgan worth billions of dollars. This was done, no doubt, to savethe financial system from imploding. This was also patently illegal, asit aided and abetted the silver manipulation.

I’m sure the motivebehind the illegal transfer of the silver short position was themistaken assumption by Treasury that an explosion in the price ofsilver (and gold) would threaten overall financial stability. Wellguess what - they succeeded in crushing the price of gold and silver,but to no avail, as financial stability has been shattered.

JPMorgan was not just an accommodative good corporate citizen in theillegal transfer of the manipulative silver (and gold) COMEX shortposition. In addition to undisclosed government guarantees againstloss, JP Morgan was given free reign to liquidate the COMEX shortposition at their discretion, knowing full-well the regulators wouldlook the other way, no matter what dirty tricks were necessary to causethe price to collapse. Nor was JP Morgan a neutral agent in the silverprice collapse. Data from the Office of the Comptroller of the Currency(OCC) http://www.occ.gov/deriv/deriv.htmindicates that JP Morgan held a much larger Over The Counter (OTC)derivatives position in silver and gold than was transferred to themfrom Bear Stearns.

My analysis shows that Morgan has made manybillions of dollars, perhaps tens of billions, from their downwardengineering of silver and gold prices from their combined COMEX and OTCshort positions. They have used that engineered price decline to buyback as many short positions as possible. If investors are wonderingwhat caused the destruction of billions of dollars in gold and silvervalues, metal and share price alike, look no further than JP Morgan,and the government officials who enabled them.

There can be noquestion that the CFTC is complicit in all these illegal activities.Same with the CME Group, owner of the NYMEX/COMEX. It is not possiblethat they are not privy and an active party to this successful downwardmanipulation. To think that officials at the CFTC, from the top of theagency, to staffers and even the Inspector General, have taken oaths ofoffice to uphold commodity law and then have allowed that law to berepeatedly violated is beyond repugnant. That they have knowinglyparticipated in an organized cover-up of this manipulation and havetaken to lying to a Congressman calls for criminal prosecution.

Asbad as this is, it gets worse. The downward manipulation of the priceof silver, initiated by the U.S. Treasury, undertaken by JP MorganChase and sanctioned and aided by the CFTC and the CME Group has provenso successful in destroying investment values that the low price ofsilver is now threatening to destroy tens of thousands of jobs of thosewho mine silver for a living, here in the US and throughout the world.Who do these people think they are that they can allow the artificialpaper price to alter real supply/demand fundamentals? Those in chargeof enforcing the law have enriched a few sleazy bankers who trade toxicpaper derivatives at the expense of tens of thousands of innocentinvestors and now ordinary workers. This should make your blood boil.

Whileinvestors in silver will soon see a strong snap-back in silver prices,it is too late for those workers who have already lost their jobs dueto the artificially depressed price of silver. At risk remain thosejobs that will be lost if silver doesn’t rebound quickly. Silver miningis tough and dangerous for rank and file workers, much tougher thanpushing paper derivatives. The fact that those who regulate our marketsdon’t see that distinction needs to be rectified.

One thing thatI have never understood is why silver mine management has not taken amore active roll in pressing the regulators to more fully address theincreasing evidence of a silver price manipulation. I suppose it has todo with fears of offending those Wall Street firms which may providefuture financing and the false pride that goes with having denied inthe past that a manipulation could exist. But surely those managershave now seen what a depressed price of silver has done to their stockprices and the fate of their companies. To still do and say nothingleaves their companies in grave danger.

I think it is time forthe employees themselves, and the unions that represent them, to takesome initiative to help themselves. Losing jobs due to crooked behaviorby big banks and their regulators should be a lightening-rod issue foremployees, unions and Congressional leadership in the districtsaffected. I’m certain that legal action against the parties responsiblefor the price manipulation would result in substantial financialdamages awarded to rank and file workers hurt by the manipulation. Tothat end, I offer, as much as is reasonably possible time-wise and freeof charge, any consultative advice to any union or Congressionalrepresentative interested in bringing action against those responsiblefor the manipulation.

For investors, conditions never lookedbetter for the long-term merits of silver, precisely because of therecent crooked take down of the price. You should do two things. Buy asmuch silver as you can and write your elected officials to end thesilver manipulation scam.